Economic Approaches
Austrian school
Key figures: Carl Menger, Friedrich Hayek, and Ludwig von Mises.
Description: Came into existence at the end of the 19th century in Austria in order to explain economic reality by deducing it from certain universal principles such as subjective value, spontaneous order and opportunity costs. The School became more distinctly organized as such after the Second World War when neoclassical Economics went through its formalistic revolution and thus moved further away from the Austrian School; at first the two were very similar. Because the world is complex and even unknowable to a large extent, unconstrained markets are viewed as the best institution as they convey crucial information through price mechanisms.
See Austrian school for video's, books, articles and more introductory material.
Behavioral economics
Key figures: Herbert Simon, Daniel Kahneman, and Amos Tversky.
Description: Uses certain insights from psychology to explain how, when and why humans may behave in ways that are different from neoclassical theory, which leads to the conclusion that human rationality is bounded. So rather than processing information like a computer as neoclassical economics assumes, people rely on heuristics that allow them to make rough judgements and are influenced by framing in doing so. Decision making within markets is however not random, hence irrationality can be predictable. This approach is widely used in policy and interaction design, a practice known as 'paternalistic libertarianism' or ‘nudging’.
See Behavioral economics for video's, books, articles and more introductory material.
Classical political economy
Key figures: Adam Smith, David Ricardo, and John Stuart Mill.
Description: Developed at the end of the 18th century to give a systematic explanation of the economy by looking at the tendency of markets to move towards equilibrium and the interaction between landowners, capitalists and workers. Based on the labour or cost theory of value, most classical political economists argued for free trade and free markets.
See Classical political economy for video's, books, articles and more introductory material.
Complexity economics
Key figures: William Brian Arthur, John Barkley Rosser, and Eve Mitleton-Kelly.
Description: Recently arisen out the application of methods from mathematics, physics and biology to economic problems. Humans are rule followers, as they emulate others and are adaptive to changes in their environment. Not everyone follows the same 'rules', and 'rules' are not constant over time. Hence, the system is always subject to change.
See Complexity economics for video's, books, articles and more introductory material.
Ecological economics
Key figures: Karl William Kapp, Herman Daly, and Robert Costanza.
Description: Economies are open and complex systems which are embedded within societal (eco)systems, most importantly the biosphere. They need to be looked at from a holistic approach. The approach questions unlimited pursuit of material wealth and utilitarian perspectives of well-being.
See Ecological economics for video's, books, articles and more introductory material.
Feminist economics / social economics
Key figures: Marilyn Waring, Amartya Sen, and Ester Boserup.
Description: Economic life is socially and morally embedded; developments in consumption, production and distribution are also explained by reference to social and moral moorings. Human beings are products of social interactions, engaging in conflict, competition as well as cooperation with each other at different moments in time. Instead of focusing on the 'economic man' who has only market transactions, they engage with the entire fabric of provisioning, investigating the ways people organize themselves to make a living as interdependent social processes. Unpaid work, such as housework and care work; informal and subsistence economies are thus also included in the analyses.
See Feminist economics for video's, books, articles and more introductory material.
Neoclassical economics
Key figures: Léon Walras, Alfred Marshall, and Paul Samuelson.
Description: Human beings are rational and selfish, as their decisions are solely motivated by expected utility maximization based on their given and stable preferences. Mathematically deduced from these assumptions about individuals, an analysis of markets arises. These markets work mainly through price mechanisms; their efficiency as well as their potential failures are analysed.
See Neoclassical economics for video's, books, articles and more introductory material.
Original institutional economics
Key figures: Thorstein Veblen, John Kenneth Galbraith, and Geoffrey Hodgson.
Description: Arose largely out of the desire to make economics an empirical science. Individuals, markets and the economy are seen as a whole. They are not analysed as independent phenomena, but as embedded in institutions. People derive habits and value-orientations from the environment, which they in turn influence through their interactions with other people.
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Post Keynesian economics
Key figures: Piero Sraffa, Nicholas Kaldor, and Hyman Minsky.
Description: The starting point is a situation in which actors are uncertain about the future, while knowing what happened in the past. Effective demand, consumption and investment, depends for a large extent on animal spirits. The normal economic situation is one of enduring involuntary unemployment and less than full use of production capacity. Capitalism exists on an inherently unstable foundation and regularly requires anti-cyclical fiscal policy interventions to achieve prosperity.
See Post Keynesian economics for video's, books, articles and more introductory material.
Radical economics
Key figures: Karl Marx, Paul Sweezy, and Richard Wolff.
Description: Focuses on conflict and exploitation within economic systems. Humans are creative beings who realize their ideas through their work. Within the capitalist system, the struggle between workers and capitalists is dominant. The drive for private profit also leads to continuous technological advances and accompanying instability.
See Radical economics for video's, books, articles and more introductory material.
Neoclassical sub-branches
Environmental economics
Key figures: Martin Weitzman, Robert Stavins, and Richard Tol.
Key theoretical mathematical models: Optimal resource depletion model and Renewable resource harvesting model.
Game Theory
Key figures: John von Neumann, Thomas Schelling, and Jean Tirole.
Key theoretical mathematical models: Nash equilibrium and Prisoner’s dilemma.
General equilibrium theory
Key figures: Léon Walras, Kenneth Arrow, and Gérard Debreu.
Key theoretical mathematical models: Arrow–Debreu model and Walrasian Competitive Equilibrium model.
Marginalist mirco-economics
Key figures: William Stanley Jevons, Alfred Marshall, and Lionel Robbins.
Key theoretical mathematical models: Perfect Competition model of Consumption Markets and Neoclassical microeconomic model of Labour Markets.
Monetarism
Key figures: Milton Friedman, Clark Warburton, and David Laidler.
Key theoretical mathematical models: Friedman's Quantity Theory of Money and Permanent income model.
Neoclassical competition theory
Key figures: Edward Chamberlin, Orris Herfindahl, and Heinrich Freiherr von Stackelberg.
Key theoretical mathematical models: Bertrand–Edgeworth model and Monopsony model.
Neoclassical growth theory
Key figures: Robert Solow, Trevor Swan, and Tjalling Koopmans.
Key theoretical mathematical models: Solow–Swan model and Ramsey–Cass–Koopmans model.
Neoclassical international trade theory
Key figures: Eli Heckscher, Paul Samuelson, and Bertil Ohlin.
Key theoretical mathematical models: Ricardian Trade model and Heckscher–Ohlin model.
Neo keynesian economics
Key figures: John Hicks, Alvin Hansen, and Franco Modigliani.
Key theoretical mathematical models: IS–LM model and Phillips curve.
New classical marcoeconomics
Key figures: Robert Lucas, Edward Prescott, and Thomas Sargent.
Key theoretical mathematical models: Real Business Cycle model and Lucas Islands model.
new institutional economics
Key figures: Oliver Williamson, Douglass North, and Daron Acemoğlu.
Key theoretical mathematical models: Williamson's model of managerial discretion and Williamson trade-off model.
new keynesian economics
Key figures: Paul Krugman, Greg Mankiw, and George Akerlof.
Key theoretical mathematical models: Calvo model of Staggered Prices and Taylor model of Sticky Wages.
public economics / welfare economics
Key figures: Vilfredo Pareto, Arthur Cecil Pigou, and James Buchanan.
Key theoretical mathematical models: Pareto efficiency and Budget-maximizing model.
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Materials: Economic approaches
The debate